MALMO, Sweden—Hexpol A.B. is set to buy rubber compounder Excel Polymers L.L.C. for $212.5 million in a deal the Swedish company said will make it the top rubber compounding company worldwide.
Hexpol said that Solon, Ohio-based Excel “has an extensive breadth of rubber compounding capabilities and the global production footprint consists of eight manufacturing facilities strategically located in the U.S., China, Mexico and United Kingdom.”
Excel posted 2009 sales of $284 million and is expected to have revenue of about $350 million to $360 million this year, according to Hexpol.
Its earnings before interest, taxes, depreciation and amortization were $21 million last year and are forecast to be $34 million to $35 million for 2010. It employs 800 globally.
The company offers formulations and products to a diversified group of end markets, Hexpol said, including general industrial, construction, automotive, oil and gas, printing, heavy machinery and consumer.
By comparison, the Swedish firm's Hexpol Compounding business posted 2009 sales of about $260 million and has operations in its home country, Belgium, Germany, China, the Czech Republic, Mexico and two in the U.S.—one under the Hexpol name in Statesville, N.C., and the Gold Key Processing Inc. business in Middlefield, Ohio. Its average number of employees last year was just under 700, according to information from Hexpol A.B.'s annual report.
Previously, the firm had purchased Thona Group operations in North America and Europe, was renamed Hexagon Polymers Compounding in 2004, and then Hexpol Compounding in 2008.
All told, Hexpol said the transaction will make it the top player in rubber compounding, with 24 manufacturing sites in nine countries.
“With the acquisition of Excel Polymers we are improving our capabilities and manufacturing footprint in order to service our customers on global reach,” said Hexpol CEO Georg Brunstam. “Our customers will experience the combination of global reach and local personalized service as we reinforce our theme 'think globally, act locally.' We are excited about the enhanced technology resources, capabilities and competencies.”
Completion of the transaction is subject to regulatory approvals and other customary conditions. Under the terms of the agreement, Hexpol will pay a cash purchase price of $212.5 million for Excel Polymers on a cash and debt-free basis. It said it will pursue a rights issue of about $80 million as soon as practical following the completion of the acquisition.
The Swedish firm said the transaction, which it expects to close by the end of November, should be immediately accretive to earnings and expects pretax synergies of about $5 million in 2011 and $7 million in 2012.
Excel has been owned since 2004 by private equity investors Lion Chemical Capital and ACI Capital after the rubber compounder was divested by PolyOne Corp. The owners decided earlier this year that the market seemed ripe for new capital to come into the business, said Hugo Sandberg, Excel senior product and marketing communication manager.
“Operations have been doing extremely well this year,” he said, adding that was one reason Lion Chemical and ACI determined that now would be a good time to put the business on the market.
Sandberg sees the deal as one that will benefit both parties. “Combined we are giving our customers a supplier with a much bigger footprint with locations across the world,” he said.
The Excel official said his firm has a much larger presence in North America, while Hexpol is stronger in Europe. The two complement each other in Asia, he said, with Excel strong in southern China and Hexpol in the country's northern region.
For its part, Hexpol sees Excel as an acquisition that makes it stronger both geographically and in certain market segments.
“Excel has some very nice pieces of business in sections we're absent from, such as rolls and additives,” said Tracy Garrison, president of Hexpol Compounding's NAFTA business. “Our North America business is largely automotive. Excel is a nice complement to that.”
He added that Hexpol will gain business with a lot of customers it didn't participate with before, including tire manufacturers, which make up roughly 10 percent of Excel's business.
And besides the boosted presence in China, Garrison said, Hexpol will benefit from an expanded presence in the United Kingdom and a second facility in Mexico.
“They have good management and are a well-run company,” he said. “Like us and others, they've been through their share of good and difficult times. We're excited about what this means for our vendors and for our customers.”
While he said it's premature to talk about integration details, he said Hexpol will put the two organizations together.
“We won't run the companies independently,” Garrison said. “We will follow the Hexpol management philosophy and operate by geography and break it down by NAFTA, European and Asian businesses. That is how we will go to market.”